There are two ways to gauge the world economy. One is to comb meticulously through all the data. Then there is the short cut – glancing at announcements from central banks. Last Thursday alone, the Bank of England announced it would pump another £50bn into the financial system, to add to the £325bn it's already put in since Lehman collapsed. The European Central Bank cut its already low main rate by another quarter-point. In Beijing, often held up as one of the few bright spots, the People's Bank cut rates for the second time in a month. Evidently, even China is sinking too. When it comes to a global crisis, all countries are eventually in it together.

From chronic unemployment to elusive growth, the symptoms are frightening – and the chosen treatment is inadequate. Because, in their reliance on Mervyn King, the European Central Bank's Mario Draghi and the US Federal Reserve's Ben Bernanke to save our economies, governments are making a serious mistake. John Maynard Keynes once described relying on lowering interest rates to power a recovery as pushing on a string. What was true in the 1930s is true today. Monetary policy has been pushed about as far as is possible – and it cannot deliver the goods. Indeed, there is plenty of evidence that ultra-cheap money may be doing harm: in 2010, the Bank's quantitative-easing programme mostly appeared to end up fuelling bonuses and speculation in things such as food. When Threadneedle Street prepares to serve up another dollop of QE cash, commodity prices typically spike.

The primary job of a central bank is to lend money – or, as the jargon has it, provide liquidity. Yet a lack of liquidity is not the major problem of our times. We are suffering from a lack of demand, with families and firms so fearful that they refuse to spend. The only thing that could make a significant immediate difference would be a dose of public spending – but David Cameron has ruled that out. On top of that, Britain's banks are so broken that they cannot pass on the Threadneedle Street billions to the real economy. The best the coalition can do here is to water down the Vickers reforms – and enact them just before the decade is out. The best a central bank can do is to keep independent banks upright. It is for the government to make them safer and more productive, but Mr Cameron has already ducked both tasks.

Add to this story the caution and conservatism of Mr King. He was slow to see the havoc that would follow the credit crunch, and wrongly applauded the coalition's cuts. Nor is he alone: in the US, Mr Bernanke was also stupidly optimistic about the sub-prime bubble – as he now admits. A system in need of restructuring is frozen in aspic by the very characters who landed it in crisis. There are few grounds for hope here; and plenty for despair.